Latest from GIFC

Monday, 21 September 2015

Call to dispel Islamic banking misconceptions in Oman

Muscat: There are some misconceptions about Islamic banking in Oman, which need to be dispelled through raising awareness about this sector, says a senior official at Bank Nizwa.

“Perhaps many market participants believe that Islamic banking is just a way to ‘Islamise’ interest and they keep comparing Islamic banks to conventional banks,” Dr Jamil El Jaroudi, chief executive officer of Bank Nizwa, told ‘Times of Oman’ in an exclusive interview.

“At Bank Nizwa, it is not only our belief, but also our commitment to build Islamic banking true to its core based on Sharia,” said the official at Oman's first dedicated Islamic bank.

El Jaroudi noted that they do not want to simply replicate what is out there in the conventional banking and continuously try to innovate and build an industry based on Sharia objectives, and not necessarily just to be Sharia-compliant.

“However, during the initial phase, we do have to provide alternatives to the current conventional products to suit the demand of customers. This process will take time. In the meantime, we can help to re-design the basic concept of finance based on Sharia, which is more equitable to all rather than only based on debt,” he said.

‘Social philanthropic’

“Another misconception is that Islamic banking is similar to a social philanthropic entity. Accordingly, why do Islamic banks ask for profit margins and fees and this is why knowledge about this industry is imperative to succeed,” the official added.

“Yes, there are ethical and social obligations but above all, Islamic banks are commercial and profit oriented businesses owned by investors who chose to put their wealth at work in a Sharia-compliant manner,” El Jaroudi explained.

Asked what Islamic banking provides should do to help enhance the performance of this sector, the CEO of Bank Nizwa said that they need to grow to a certain size to be able to compete on equal footings, meaning good services and good returns to both clients and investors.

Protection

“Islamic banks need to be protected, may be incentivised as well, until it gets there because the ultimate beneficiary is the economy of Oman,” he said.

In addition, El Jaroudi said that Oman can learn from the Islamic finance experience of its neighbouring countries as well as other countries in the Far East and other regions.

“Oman has the advantage of seeing and learning from the experiences of the other markets, be it good or bad. If you look at Oman’s Islamic banking regulations, it is very much influenced by this, in addition to choosing what Oman decides is right for its market,” he said.

“However, learning does not stop here. Now we need to dig more into the main benefits of Islamic finance to economies in general and be prepared to modify or add what benefits the Sultanate the most,” El Jaroudi stated.